The Middle East war has added volatility, in particular, to specialty lines' 2026 earnings, according to S&P Global Ratings (S&P).
In its report, “Insurers' Capital Positions Set The Stage For Ongoing Resilience”, S&P says that while the impact of the war on the global reinsurance industry has so far been largely contained within earnings, it underscores the sector's exposure to emerging and nontraditional risks. Despite these uncertainties, the industry's strong capital adequacy is set to remain a key strength, enabling reinsurers to navigate increasingly complex and interconnected risks.
Reinsurers' solid capital levels are underpinned by resilient underwriting margins, strong investment income, and favourable earnings that S&P expects to remain above the cost of capital in 2026. Global reinsurance capital reached a record $785bn at year-end 2025, with growth across both traditional and alternative capital sources. While pricing adequacy remains generally supportive, premium rates, especially in short-tail lines, are declining, indicating that underwriting profitability may come under increasing pressure as competition intensifies.
Elevated natural catastrophe exposures increase underwriting pressures
Exposure to natural catastrophes, particularly peak perils and aggregated risk accumulations, remains one of the key risks for the sector. Elevated global catastrophe losses, coupled with challenges in US casualty lines, will likely weigh on underwriting performance. In response, S&P expects reinsurers to maintain disciplined underwriting practices, including tighter risk selection, strategic use of retrocession, and selective deployment of capacity. Preserving this discipline, especially in terms and conditions, will be critical as competition for premium growth increases in a softening market.